How to Cancel a Credit Card and When to Do It

Canceling a credit card is a simple process, but doing so comes with risks to your credit score that may outweigh any advantage to closing the account. Consider your reasons for closing the account and whether an alternative may be a better option for you and your personal finances.
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Should I Cancel a Credit Card?

There are only a handful of reasons why you should consider canceling a credit card account. Otherwise, there are other options (see below) for managing a credit card that you don’t use anymore. Couples going through a divorce should cancel any joint credit card accounts and spell out in their divorce settlement how any unpaid balances will be addressed. If you can’t control your spending and consistently max out your credit card, maybe it’s time to cancel the account until you can responsibly manage credit. Last, if you have a credit card with an annual fee that doesn’t fit your budget and offers benefits that you don’t use, then it might be time to close the account. But if the card you want to cancel has no annual fee, it’s worth keeping open, especially if it has a large credit limit that can help your credit score. Keep it in a drawer and use it occasionally to keep the account active.

How Closing a Credit Card Affects Your Credit Score: The biggest downside to closing a credit card account is how it affects your utilization rate, a key component of your credit score. The rate represents the percentage of your available credit that you use; the lower the percentage is, the better. For instance, if you charge $250 on a card with a $1,000 limit, then your utilization rate is 25%. Your credit score considers utilization rates for each card and for all card accounts in aggregate. It’s recommended to keep both utilization rates below 30%. When you close a credit card account, you lower how much credit is available to you. That, in turn, increases your utilization rate even if your balance total remains the same.

Consider this example:

Card A

Card B

Card C

Credit limit: $1,000

Credit limit: $500

Credit limit: $1,000

Balance: $550

Balance: $200

Balance: $0

The overall available credit across the three cards is $2,500. The total combined balance is $750, or 30% of available credit—your overall utilization rate. Say you close Card C because you never use it, then the total available credit on Card A and Card B shrinks to $1,500. But the total balance remains the same at $750, or at a much higher 50% utilization rate. That higher rate will hurt your credit score. To mitigate harm to your credit score, pay down any balances as much as possible before closing a card account and adjust your future spending to stay below 30% on your remaining cards. If you plan to apply for a mortgage or auto loan in the near future, hold off on closing any accounts until after you get the loan.

There is much confusion over how a closed account affects other credit score factors, such as payment history, length of credit history and mix of credit. The effect on these factors is largely nonexistent. When you close a credit card, the account and any positive payment history associated with it can remain on your credit report for up to 10 years. That means a closed account will still factor into the age of your credit history and the mix of account types for the next 10 years.
Note that negative information—such as missed payments—falls off your credit report only after seven years by law, so closing a card won’t erase any bad payment history.

How to Cancel a Credit Card

Before closing the account, check your rewards or points balance. You’ll likely lose some of those, but with smart planning, you can redeem at least some of them. Check your issuer’s rewards website for different ways to redeem. If you don’t have enough for travel or merchandise, consider gift cards or statement credits. If you’re close to a minimum amount for redeeming, consider putting another purchase on the card to get to the minimum and qualify for the cash back. Depending on the issuer, you may be able to move earned rewards or points to another card that you have with that issuer. Ask if that possibility exists.

Canceling a credit card account doesn’t involve more than a phone call to your credit card company. Use the phone number on the back of your card or the one listed below. Keep in mind that the issuer will try to dissuade you from closing your account by noting the potential credit drawbacks and by possibly offering better terms. Consider the offer if it addresses your main concerns with your credit card. The issuer may email or send a letter that requires a response to confirm your request to close the account. It’s usually not necessary to send a certified letter to your issuer to cancel your account, unless the account is part of a divorce and you want written confirmation for your records.

Issuer

Phone number

Citi

1-800-950-5114

Chase

1-800-432-3117

Capital One

1-800-227-4825

Bank of America

1-800-732-9194

Discover

1-800-347-2683

American Express

1-800-525-3355

Wells Fargo

1-800-642-4720

Barclaycard

1-866-928-8598

There’s a common misconception that you can’t close a credit card without paying off the outstanding balance first. That’s not true. The issuer will close a card with a balance, so you can’t add any new charges to the account. But you will be billed for the outstanding balance until it is paid off. If you close an account with a balance, confirm the remaining amount with your issuer. Ask when the next payment is due and verify the payoff schedule. It’s best to get this in writing. If you can, pay off the balance before canceling the card. That way you to avoid the possibility of paying any late fees or interest in the future if you miss a payment.

Alternatives to Closing a Credit Card

If you’re closing a credit card because of its expensive annual fee or high interest rate, call the issuer and try to re-negotiate for better terms. In some cases, issuers will waive or reduce an annual fee for the next year or lower an interest rate to keep a customer who consistently pays on time. If that doesn’t work and you still want to get rid of an annual fee, ask the issuer to downgrade from your current premier credit card with the fee to a plain-vanilla card that doesn’t charge a fee. However, be aware that, by doing this, you may forfeit certain card benefits or accelerated rewards with the downgrade. Make sure the new card is still a good fit for your lifestyle.

If the card you want to close doesn’t charge an annual fee but you don’t use it anymore, keep the account open and cut up the card. That way, you still have the available credit for your credit score, but you don’t have the temptation to spend. Destroying the card also minimizes the risk of card theft. But remember to check the account every six months to make sure the issuer hasn’t closed the account for inactivity. You may need to make a small purchase on the account once a year to keep the account active.

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